MOSCOW Russia's leaders said on Thursday the new Eurasian Union that Moscow wants to create would build on the best values of the Soviet Union.

Vladimir Putin, who plans to seek his third term as president in an election in March 2012, outlined last month his vision for the new body which would build on an existing Customs Union with Belarus and Kazakhstan.

Speaking to Russian pensioners and World War Two veterans in the Kremlin ahead of a parliamentary election in just over two weeks, President Dmitry Medvedev and Prime Minister Putin played up their nostalgia about Soviet times.

"You remember the kind of words that accompanied the collapse of the Soviet Union. It was a very hard, sad time," Medvedev said. "We are working now to unite on a new basis, and I am certain that this union will have a very good future."

Medvedev and Putin will host the presidents of ex-Soviet Belarus and Kazakhstan, Nursultan Nazarbayev and Alexander Lukashenko, in Moscow on Friday to discuss ways of further integration into the Eurasian Union.

"We would like for each state that wants to join the Customs Union, the Common Economic Space, and in future the Eurasian Union, to make that choice consciously, so that nobody then says they were roped in," Medvedev said.

Critics have said the Russian integration drive aims to restore the Soviet empire -- a personal ambition of Putin, a former KGB agent who called the collapse of the USSR "the greatest geopolitical catastrophe of the 20th century".

Most Russians have positive memories of the USSR in the 1970s and early 1980s for its stability and high social security standards which disappeared after its collapse in 1991.

"I could not have dreamt up in a worst nightmare what started happening after the collapse of the Soviet Union," Medvedev told the pensioners who presented him and Putin with homemade woollen mittens and socks.

MEANS OF SURVIVAL

Putin said earlier that his integration drive was not an attempt to capitalise on the nostalgic mood among the older generations. He said it was pursuing purely economic goals and modelled on the European Union.

Medvedev, who plans to step down as president and has been promised the post of prime minister by his mentor Putin, said the Soviet Union had succeeded in creating "a Soviet people" from many different nationalities.

"This model had worked and this was an absolutely legitimate goal. It did not have any ideological colours," Medvedev said. "It was a means of survival for the giant nation living on the vast territory of our country."

Russia is facing a rising wave of nationalism, mostly among ethnic Russians angry about an influx of migrants from the poor North Caucasus region, as well as from the former Soviet countries where living standards are lower.

The two leaders face difficulties in addressing the potentially explosive issue in their election campaigns. Medvedev said the Soviet experience could help.

"We should not be shy when bringing back the ideas of ethnic unity. Yes, we are all different but we have common values and a desire to live in a single big state," Medvedev said.

(Writing by Steve Gutterman; Editing by Robert Woodward)

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